Thursday, July 9, 2009

Influencing a Young Adult's Financial Habits - The Parent's Role

As your sons and daughters reach young adulthood and take those first steps towards independence (isn’t that the goal?!), ask yourself whether they are leaving the nest with a healthy attitude about money and are prepared to responsibly manage their personal finances. Why some kids form good financial habits and others falter in matters of money is a question posed by a program initiated at the University of Arizona and known as the Arizona Pathways to Life Success for University Students or APLUS.

With a representative sample size of 2,098 students who were freshman in the fall of 2007, the study seeks to understand the relationships and factors that influence financial habits and how these attitudes are formed. Questions asked in the survey focus on issues of budgeting, borrowing, saving money and paying bills.

The researchers began collecting their first set of data in the spring of 2008, during the students’ second semester, and used this information to create a statistical model that assessed how parental teaching, work experience and high school financial-literacy courses affected the students’ behavior. I doubt the initial findings will come as a surprise to anyone: the researchers found that parental teaching was by far the most influential factor. Its impact on students’ financial relationships with their parents, satisfaction with their own monetary behaviors, and the wisdom of their actual financial habits is more significant than the other two factors combined.

As the parent of teenage daughters, I must admit that the initial results of this study hit home…literally! We hear that the behaviors we model will influence our kids’ attitudes and leave an impression that lasts long after they leave home. But is it enough to exercise good financial habits without teaching them the basics? The message to take away from this study is that we as parents need to consciously teach and communicate good financial behaviors to our children and not take for granted that they will know what to do when they venture out on their own. This is not something they pick up through osmosis. They need to be taught the difference between risky and sound money management practices as well as purely practical things such has how to balance a checkbook. These are the lessons that will enable them to establish healthy financial relationships in the future with their families and partners.

The researchers at APLUS had initially planned to collect the next round of data during the students’ senior year, yet have decided to use the current recession as an opportunity to measure the economy’s effect on the sample group’s behavior. The results of the follow-up survey which the students completed this past spring are expected to be released in the fall. For anyone interested in seeing the report on the initial phase of the study you can find it at

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